Intel’s shares have delivered disappointing returns over the past five years, but some investors may view the stock as “cheap” given its historical dominance in the CPU market. However, a closer look at Intel’s financials and growth prospects reveals that the stock is not as cheap as it appears.
While Intel remains the leading supplier of CPUs for consumer PCs, its market share losses and Wall Street’s earnings estimates suggest that the company may be facing significant challenges. In contrast, AMD has been gaining ground in the data center and server chip markets, driven by strong demand for its Ryzen and Epyc server CPUs.
Intel’s revenue growth from its data center segment was just 9% year over year in Q3, compared to a 122% increase at AMD. Meanwhile, AMD reported an 29% year-over-year increase in revenue from its client segment, driven by strong demand for Zen 5 Ryzen processors.
Analysts expect Intel to strengthen its profitability next year as it launches new products and report earnings per share of $1 in 2025. However, the stock still trades at a price-to-earnings ratio of about 23, which is slightly higher than the S&P 500 average. Moreover, Intel’s annualized growth rate is expected to be only 5%, in line with previous estimates prior to the stock’s fall.
Given Intel’s ongoing share losses and the competition from AMD, it may not be wise for investors to buy the stock at these lower prices. While new Core Ultra processors and upcoming Panther Lake chips could potentially position Intel for a comeback in the consumer market, AMD is also innovating with a pipeline of new chips to take advantage of similar opportunities.
Therefore, investors should exercise caution before pulling the trigger on Intel stock. It’s essential to wait until the company stabilizes its market share losses with new products and demonstrates sufficient growth to provide satisfactory returns to shareholders.
Source: https://www.fool.com/investing/2024/11/09/intel-stock-cheap-10-years-buy